Daniels Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and had used a budgeted selling price of $19 per unit.
Actual Budgeted
Units sold 280,000 units 278,000 units
Variable costs $960,000 $886,000
Fixed costs $60,000 $51,000
What is the static-budget variance of operating income?
| A. |
$316,000 unfavorable |
|
| B. |
$325,000 favorable |
|
| C. |
$325,000 unfavorable |
|
| D. |
$316,000 favorable |
Static Budget Variance of operating income = Actual Operating Income - Budgeted Operating Income
| Actual | Budgeted | Actual - Budgeted | |
| Sales Revenue (Units sold * Selling price) | $5,040,000 (280,000 * $18) | $5,282,000 (278,000 * $19) | $242,000 (U) |
| Less: Variable costs | $960,000 | $886,000 | $74,000 (U) |
| Contribution margin | $4,080,000 | $4,396,000 | $316,000 (U) |
| Less: Fixed Costs | $60,000 | $51,000 | $9,000 (U) |
| Operating Income | $4,020,000 | $4,345,000 | $325,000 (U) |
Static Budget Variance of operating income = $325,000 unfavorable
Working Notes:
If Actual Sales revenue is greater than the budgeted sales revenue, then variable is Favorable..or Vice Verca. If , Actual operating income is greater than the budgeted operating income, then variance is favorable or if, actual operating income is less than the budgeted operating income, then variance is unfavorable
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